Piping hot ideas served on a bed of hummus.

Following a wave of public criticism over the decision to lay off 700-800 employees in Israel as part of a companywide restructuring program, Teva Pharmaceutical Industries announced Tuesday that it had reached an agreement with the Histadrut labour federation to not dismiss any of its Israeli workers without the federation’s consent.

The debate over the fate of Teva’s workforce in Israel reached a fever pitch earlier in the week when opposition leader Shelly Yachimovich (Labor) called Teva’s plan “a mass terror attack,” saying that given the near-zero taxes the pharmaceutical giant pays the state, the plan was an “act of cannibalism.”

The problem with Yachimovich’s populist blather is that it spares her the necessity of having to explain how exactly Israel is strengthened – economically and socially – by the Histadrut’s strong arm tactics. While claiming to be acting in the interest of Israel’s workers, facts are stubborn things and the Histadrut’s fingerprints are all over an Israeli society that is being hobbled by a skyrocketing cost of living.

The Histadrut has increased the burden on Israel’s middle class by rigorously protecting thousands of jobs – no matter how overpaid or badly done – at the ports, the Israel Electric Corporation, the banks, the water utility Mekorot, the local authorities, the military industries, Israel Railways and more.

Employees at these government monopolies are paid in excess of a billion shekels a year, far above what they would earn in a competitive market. The salaries of these overpaid union members and government workers are financed directly by the middle class.

Yes, the same middle class that Yachimovich and her Histadrut cronies claim to be acting on behalf of has seen its standard of living plummet as a result of rampant government intervention. In fact, Israel’s leading opposition figure is so opposed to competition and so protective of her supporters’ monopolies that she even wants to increase import duties.

To listen to Yachimovich bloviate and Histadrut representatives belly-ache, one might be tempted to believe that they are earnestly trying to save Israel from becoming Russia, a country where corruption has penetrated all levels of government and most other aspects of life.

Sure, the economy has no shortage of problems, in particular a startling degree of income inequality. But in the span of just a few decades, Israel has transformed itself from a semisocialist backwater into a high-tech superpower.

While most of the world is afflicted by an economic meltdown, Israel demonstrates fiscal responsibility, sustained economic growth and a conservative, well-regulated banking system.

Furthermore, the emergence of Israel as a hi-tech hub has allowed it to get through the global economic downturn with no deficit or stimulus package.

Yet, Yachimovich and the Histadrut continue to chase the windmills powered by the memories of 450 percent inflation. Sadly for the Labor party’s leading light however, 2013 is not 1973. Partly as a result of the massive military buildup that followed the 1973 Yom Kippur War, Israel began ratcheting up its public sector spending. By the end of the decade, the government was consuming three quarters of the economy and leaving behind huge budget deficits, which it tried to finance by having the Bank of Israel print money.

Turns out the elixir for Israel’s societal ills was to free itself from one-party control of the government and the economy. Today, economists around the world agree that free trade creates jobs through economic expansion.

If Israel’s powerful organization of trade unions a well as its chief political benefactor are truly interested in protecting the country’s workers, they should focus less on preventing ‘massive terrorist’ attacks and more on opening up the country to competition and international trade, which would allow all Israelis to raise their standard of living and pay fair and affordable prices for basic products.

One thought on “Massive Terrorist Attack Averted: Histadrut to Decide on Future Layoffs at Teva”

Other questions worth exploring: have Israel and the Israeli public/economy benefited proportionally to the very generous tax breaks enjoyed by Teva? How, who gained? Have these concessions been worth it and do they need to be adjusted? The public service in Israel could definitely use a dose of efficiency, but liberalized trade without reasonable regulation will only aggravate matters (for the little guy).